Govt allows 41 more housing finance cos to use SARFAESI law

Call this a New Year gift from the Government to the housing finance sector. The Finance Ministry has allowed 41 more housing finance companies (HFCs) to use the SARFAESI law, bolstering their efforts in recovery of dues and thereby reducing their non-performing assets.

This move of the department of financial services (DFS) is also expected to build confidence among the HFCs to lend more to the vulnerable section of society, thereby aiding financial inclusion.

Taken together with the 19 HFCs notified earlier for availing SARFAESI law, almost the entire housing finance industry regulated by the National Housing Bank can now use this law for recovery of their dues.

Reacting to this latest finance ministry move, Anil Kothuri, who heads Edelweiss Housing Finance, said this would help in reduction of non-performing assets (NPAs) for the company.

“SARFAESI law will be a quicker way to recover our dues instead of going through regular court. The entire recovery process will get accelerated. It will also put us on par with other players in the housing finance industry who already use SARFAESI law”, Kothuri told BusinessLine when contacted.

Edelweiss Housing Finance forms part of the list of 41 HFCs notified by the Finance Ministry as a “financial institution” under the SARFAESI law.

The other players, who form part of this list, include Reliance Home Finance, Tata Capital Housing Finance, Shriram Housing Finance, DMI Home Finance, Aditya Birla Housing Finance, Muthoot Housing Finance and Manappuram Home Finance.

K V Srinivasan, Chief Executive Officer, Reliance Commercial Finance, and director at Reliance Home Finance said that the latest move was an enabling norm for the industry to deal with habitual and stubborn defaulters, something used by industry very cautiously and remotely after exhausting options.

The total home loan outstanding in India is estimated at about Rs. 10 lakh crore as of December 31, 2014.

Of this housing loan book of Rs. 10 lakh crore, as much as Rs. 6.3 lakh crore was accounted for by banks, with the remaining Rs. 3.7 lakh crore coming from the HFCs.

The Indian housing finance market is dominated by five major groups -- State Bank of India, LIC Housing Finance, HDFC, ICICI Bank and Axis Bank. These five groups account for over 60 per cent of housing credit in the country.

Currently, the non-performing assets level for HFCs is miniscule. Their gross NPAs as on December 31, 2014 stood at 0.74 per cent.

Despite the stress in their operating environment, many HFCs have been able to maintain their asset quality.